So little is understood about the small things that set up a person’s ability to claim non-residence status for tax purposes (so that they are subject to tax only on Australian sourced income and not worldwide income). As global mobility for talent continues to be widespread, expatriates and multi-resident entrepreneurs are becoming the target of the ATO. Records and evidence to support or deny Australian residency is essential. As simple as it may sound, this includes appropriate completion of the incoming and outgoing passenger cards.
Increasingly, the ATO is examining the simple passenger card. The Courts are more regularly considering the manner in which a person completes their Australian Immigration outgoing and incoming passenger cards and, in some instances, it is persuasive of the individual’s tax residence.
Our own experience is that no attention is given to what the card says. Yet simple advice can be given as to how to complete the cards in a way that matches personal circumstances and objectives.
An individual is an Australian tax resident if he/she “resides” in Australia within the ordinary meaning or satisfies any of the three additional statutory tests (the domicile test, 183 day test and superannuation fund test).
These tests differ from the tests used by the Department of Immigration for determining visas. This means that for clients who have any visa (to work or to live permanently), but seek to maintain tax residence outside Australia, careful completion of their passenger cards is relevant to support the conclusion that the individual is not an Australian tax resident.
The Federal Court in the Commissioner of Taxation v Wong considered whether the respondent was personally liable under section 255(1)(c) of the Income Tax Assessment Act 1936 for tax payable by a non-resident, Ms Lee. The Commissioner relied on the passenger cards which showed that Ms Lee had made only three visits to Australia, stated she was a “visitor or temporary entrant departing” and indicated her country of residence to be outside Australia. The Court held that the completion of the cards on these terms was persuasive of Ms Lee’s non-resident status.
Importantly, all of the facts and circumstances are relevant to the consideration of the following eight factors that courts generally take into account in determining residence (as stated by the High Court in Miller):
- Physical presence in Australia;
- History of residence and movements;
- Habits and “mode of life”;
- Frequency, regularity and duration of visits to Australia;
- Purposes of visits to or absences from Australia;
- Family and business ties with Australia compared to the foreign country concerned; and
- Maintenance of a place of abode.
In general, physical presence and an intention to treat that place as home are two key elements (per Williams J in Koitaki Para Rubber Estates Limited v Commission of Taxation).
The Tribunal in the AAT cases of Sneddon and Ellwoodeach considered whether the taxpayers were resident in Australia. Both decisions considered the passenger cards as relevant to intention. In Sneddon, the taxpayer, by completing his intended address in Australia as a property which he retained and where he left personal items, affirmed his physical presence (notwithstanding that he was working outside Australia). In Ellwood, the taxpayer made consistent declarations of permanent residency on his passenger cards without qualification.
In the recent AAT decision in Taxpayer and Commissioner of Taxation (14 June 2013), the taxpayer, an engineer, was a permanent resident of Australia since 1989 and bought property and established his home in Australia. In 2010 to 2011, the taxpayer worked in Singapore and India. The Commissioner’s view was that the taxpayer was an Australian resident for tax purposes of the year ended 30 June 2011. Relevantly, his continued association with Australia and recording on his immigration outgoing passenger card as “Australian resident departing temporarily” and stating that Western Australia was the state in which he “lives” were relevant factors supporting his intention to return to Australia.
The question of whether an individual is tax resident is one of fact and degree. While all of an individual’s circumstances are relevant to determining tax residence status, immigration passenger cards will be one factor which the Courts and Tribunal have considered relevant and, in some cases, persuasive. As the taxpayer bears the burden of proving an assessment excessive (and hence proving that they are not resident for tax purposes), taxpayers should ensure that all their records, as far as possible, reflect and support their residency intention and the passenger card is a simple aspect to get right.